Manufacturing index motors on

NEW YORK -- Manufacturing activity grew at a faster pace in July than in the previous month, driven by new orders and increased production, a private research group said yesterday.

The Institute for Supply Management reported its manufacturing index rose to 56.6 last month, up from 53.8 in June and greater than the 54.1 that analysts were expecting.

Economists said strong sales in the auto industry helped propel the results.

''In July production in the auto industry tends to slow down but not last month," said Mark Vitner, senior economist at Wachovia Securities.

Sales promotions cleared excess inventory, prompting carmakers to keep production steady during the traditionally slow summer season to meet demand in the autumn and winter.

It was the 26th consecutive monthly increase in the index. A reading of 50 or above means the manufacturing sector is expanding. A figure below 50 represents a contraction.

The new orders index rose to 60.6 in July from 57.2 in June while the production index surged to 61.2 from 55.6 a month earlier.

Lower prices also helped fuel the rise in the overall index. The price index decreased to 48.5 in July from 50.5 in June. The dip marked an end to 40 consecutive months of higher prices.

''The prices index apparently reached the end of its run in June, as the July index indicates that pricing power, at least for the short term, is now once again favoring buyers," Norbert J. Ore, chairman of ISM's Manufacturing Business Survey committee, said in a release.

Meanwhile, the Commerce Department said yesterday that builders trimmed spending on construction projects around the country in June. Analysts had expected a rise of 0.5 percent.

Spending on all construction projects dipped by 0.3 percent in June from the previous month. Even with the decline, though, the value of all projects was still at a healthy level of $1.1 trillion, at a seasonally adjusted annualized rate.